Group Created with Sketch.
Volume 22 No. 3

Media

Disney’s Bob Iger will be sorting through offers for the Fox Sports RSNs. A deal could close as early as the first quarter of next year.
Photo: Getty Images

Fox Sports and NBC Sports — two of the companies that were considered the most likely bidders for all or part of the 22 Fox Sports regional sports networks being sold — did not submit bids last week when they were due.

 

Speculation over the past several months was that NBC Sports would pick off the RSNs in markets where it is the dominant cable operator — places like Atlanta, Detroit and Miami — and Fox Sports would look to buy back the RSNs at a discount. But the lack of bids to Allen & Co., who is handling the sale along with JPMorgan Chase & Co., threw cold water on both of those scenarios.

   

Mark Lazarus, NBC Broadcasting and Sports chairman, went so far as to say that Comcast is not in line to buy any of the Fox RSNs. It was notable that Comcast did not even sign a non-disclosure agreement last month that would have given it access to the bid book for the RSNs.

  

“The government’s not going to let us buy any more where we are heavy in cable — we’ve already been informed of that,” Lazarus said during a recent Fairfield County Sports Commission event in Stamford, Conn. “We can’t buy any of those assets that Disney is going to try to dispose of.”

  

Fox Sports, which continues to operate the RSNs throughout the sales process, still could put forth a bid as that process develops, but it is far from certain that Fox will engage. A deal could close as early as the first quarter of next year.

 

That marks an incredible turnaround from last year, when Fox Sports executives were disappointed to learn that, because of arcane tax rules, the RSNs were included as part of Disney’s $71.3 billion acquisition of 21st Century Fox’s entertainment assets. After all, the RSN group was among the most profitable part of Fox Sports’ business.

  

Since then, Fox has embarked on a slimmed down broadcast-centric strategy that emphasizes national deals for its “New Fox” broadcast channel, plus FS1 and FS2 cable channels.

 

“We really ran the regional business and the national business pretty separately,” Eric Shanks, Fox Sports president, COO and executive producer, said at a recent Bank of America conference. “On the buy side, we didn’t buy rights together.”

 

At deadline last week, it was difficult to determine exactly who bid for the RSNs, with everyone from Sinclair to former rap star Ice Cube showing interest over the past several weeks. The biggest question is whether the RSNs would be sold off as one big group or individually.

 

Importantly, the sale of Fox’s RSNs to Disney triggered a clause in YES Network’s contract that would allow the Yankees to take back ownership of the RSN. Sources said the team already has been in contact with companies interested in investing in the RSN. Sources with knowledge of those talks said all signs point to the Yankees actually taking back ownership of the RSN, which means that the country’s biggest RSN likely will not be part of the final Fox package being sold.

 

Interestingly, that contractual clause would have been triggered if Fox sold YES Network to one of three companies: Disney, Comcast or a company led by one of the Dolans, who operate another RSN in the New York market, MSG Network.

 

The level of uncertainty about how the Fox RSNs will be sold has seeped down to the team level. RSN deals are critical to a team’s business model, so not knowing who their final partner will be in that space or what the budgets will be like is unsettling, one team executive said.

The Blackhawks, Bulls and White Sox are nearing an extension with NBC Sports Chicago, presenting the clearest signal yet that the Cubs will go out on their own to launch a regional sports network.

A deal with NBC Sports Chicago and the Blackhawks (owned by Rocky Wirtz) and the Bulls and the White Sox (both owned by Jerry Reinsdorf) is said to still be several weeks, if not months, away. But talks are progressing amicably as the RSN contemplates a future without the highly rated Cubs.

The Blackhawks deal is up at the end of this season, so the team needs to have a new deal in place by the team’s opening game in October 2019.

The Cubs still could cut a deal to remain part of NBC Sports Chicago with the other three teams, but that scenario does not look likely, according to sources. While executives from the Cubs and NBC Sports talk regularly, the two sides have not sat down for formal negotiations in months and have no meetings planned for the near future.

Cubs executives have been open about their desire to control their local media rights when their current deal ends in 2020, spending much of the past three years discussing such a move publicly. The team has placed packages of games on WGN, the local ABC affiliate and Facebook.

Currently, the four teams own 20 percent each of NBC Sports Chicago, with NBC Sports Group holding the remaining 20 percent. It’s not known how the ownership of a three-team RSN would be allotted.

The pay-TV industry has plenty of examples of teams that have launched their own RSN. Some, like the Yankees’ YES Network and the Red Sox’s NESN, have been successful. Others, like the Dodgers’ Spectrum SportsNet LA and the Astros’ CSN Houston, have struggled to get enough distribution to be successful.

It remains to be seen whether Comcast, the dominant cable system in the Chicago area, would be persuaded to carry a new Cubs RSN, especially if the team spurns Comcast to launch it.

The Cubs are banking on the idea that their popularity in Chicago will convince pay-TV distributors to carry the channel. The team’s 4.38 regular-season rating in 2018 was MLB’s seventh-highest local cable number, a significant distinction for such a big market. By comparison, the Yankees posted their highest local rating in six seasons with a 3.62.

One of the most contentious sports media negotiations in recent memory — rights to stream MLB games locally — is back on the front burner.

MLB’s local streaming deals with Fox Sports and Comcast-owned NBC Sports, comprising the majority of MLB teams, ended after the 2018 season and the two network groups already are butting heads with the league over a renewal. MLB signed a three-year deal with Fox’s RSNs at the end of 2015, which set the market and helped lead to similar deals in early 2017 with Comcast RSNs, and then with the Fenway Sports Group-owned NESN and AT&T forerunner Root Sports that generally ended after this season.

Just as the original deals took years of often-arduous negotiation, renewals do not look to be straightforward, with two main snags emerging:

■ MLB wants an increase for its streaming rights fees. RSN executives are pushing back, saying that even though they paid for these streaming rights in the past, such rights typically are not carved out from other media rights packages they buy.

■ MLB wants to make its streaming deals run the same length as the various RSN linear TV deals. RSN executives say that the media landscape is so fluid that they do not want to be locked into long-term streaming deals. RSN executives complain that they don’t make money off of the current stream deals, and say they are difficult to produce, sell and market.

Formal negotiations started soon after the end of MLB’s regular season. Only three MLB teams — the Baltimore Orioles, Los Angeles Dodgers and Washington Nationals — do not have in-market streaming deals for various reasons. The negotiations are especially important given the pending sale of Fox’s RSNs, the relaunch of NBC Sports Regional Networks’ mobile app, and Fox’s negotiations to renew its deal for MLB’s national rights, including the All-Star Game and World Series.

Part of the valuation media companies, teams and private equity are placing on Fox’s 22 RSNs undoubtedly includes streaming rights. As the pay-TV industry continues to lose subscribers and media companies launch over-the-top services, streaming rights become more valuable. The original MLB in-market streaming deals were solely on an authenticated basis and required a traditional cable or satellite subscription for access. A key question going forward is whether a standalone offering might ultimately emerge.

MLB executives see the value in these rights and want to be compensated for them. RSN executives say that video streams of their MLB games are no different than their linear television feeds and believe they’ve already paid for those rights as part of their media rights deals.

Having grown up as a fan of the “Rocky” movies, Steven Caple Jr. jumped at the chance when he was offered the opportunity to direct “Creed II,” the eighth film of the “Rocky” series, which will be released on Nov. 21.

 

Still, the young director had some concerns. After all, it’s never easy to direct a follow-up, he said.

  

“It was a sequel, so you don’t know how people feel about doing it again,” he said. “The expectations of a sequel are tough, so if I don’t have them in my corner, I really don’t want to do this at all.”

 

Caple also had to conform the same story arc that dominates these films — one of beating the odds to become a champion. Like other films in the series, Caple’s effort includes subtle homages to previous films, like when Creed’s cornerman considers stopping a fight early, similar to a scene from “Rocky IV.”

 

Of course, “Rocky” films typically are known for their fight scenes, and “Creed II” has two of them. Stylistically, each one is different.

  

“The first one is a little glossy with Andre Ward, bringing him back from (the first) ‘Creed,’” Caple said. “The second fight [with Florian “Victor Drago” Munteanu] is a little grittier, handheld, chaotic, in-your-face. The last one, I pull out all the cards and wanted you guys to really feel the presence of the ring and the punches.”

 

An avowed “Rocky” fan, I asked Caple to rank his favorite films of the series. He said, “If ‘Creed’ is allowed in there, ‘Creed’ would be [at the top].” Of the “Rocky” films, his rankings are:

 

1. “Rocky”

2. “Rocky II”

3. “Rocky IV”

4. Rocky VI (called “Rocky Balboa”)

5. “Rocky III”

6. “Rocky V”

 

Caple: “Rocky II was really underrated. I thought it was a natural progression to the ‘Rocky’ series, even though [Sylvester Stallone’s] hair was long for some reason. Ultimately, the intimacy there — I thought [the character] didn’t lose his touch. He started making money. You saw these natural changes, at least for that time period. I thought it was an underrated film. It was one of the first ones I saw growing up.”

 

■ ■ ■ ■

 

John Ourand moderated a “Creed II” panel discussion with director Steven Caple Jr. and actor/boxer/kickboxer Florian Munteanu. The event was held Nov. 1 after a screening in Washington, D.C.
Photo: Joe Favorito

Caple first heard of Munteanu — the actor who plays Ivan Drago’s son in “Creed II” — late last year. The 30-year-old film and TV director was at Stallone’s Hollywood house talking about his plans to direct the eighth film in the “Rocky” series when Stallone took him into his home office.

 

“He pulls up this YouTube video of Florian, and this dude is doing a workout in the video, throwing stuff against walls,” Caple said. “I’m like, he’s good, but I don’t know if he can act. Sly found him legit.”

 

A 6-foot-4 boxer and kickboxer who lived in Germany, Munteanu had never acted, but he has an imposing physique that brings to mind actors like Mr. T and Dolph Lundgren, who starred in this series. When Munteanu flew to Hollywood to audition for the role, Caple was impressed with how quickly he gelled with the film’s star, Michael B. Jordan.

 

“When he came in it looked like another piece of the puzzle,” Caple said.

 

A Romanian who grew up in Germany, Munteanu was familiar with the “Rocky” movies. He recalled that the first one he saw was “Rocky IV” — the one with Ivan Drago that serves as a precursor to “Creed II.”

 

It wasn’t so easy for him to see that film, though. Munteanu’s father wanted his son to be a boxer and tried to expose him to the “Rocky” films. Munteanu’s mother, though, found the films to be too brutal and did not want her young son to see them, Munteanu said. In order to see the film, his father sneaked him out of the house after he went to bed and drove to his office. The two sat side by side and watched “Rocky IV,” which was on German television.

 

“My mom is always sensing when my father is planning something,” Munteanu said. “She was looking into my room and saw the empty bed. … When we came home, my father wanted to put me in my bed. He opened the door and she was there. That’s my special ‘Rocky’ moment.”

 

Did the man who plays Victor Drago in “Creed II” cheer for Ivan Drago that night?

 

“Yes, I did.”

John Ourand can be reached at jourand@sportsbusinessjournal.com. Follow him on Twitter @Ourand_SBJ.

Liebman

Home Team Sports hired research veteran Gregg Liebman as vice president of sales insights and strategy, a role that will see him work more closely with research vendors. He will report to Craig Sloan, executive vice president of ad sales for HTS, and be based in New York.

“Gregg’s acumen will allow us to continue our journey in defining the special and unique behavioral attributes of the Home Team Sports fan,” Sloan said. “His insights and strategies will provide clear, defined pathways for brands to connect to this enormous, and intensely loyal, group of viewers.”

Liebman comes to HTS from NBCUniversal. He has spent the past 25 years working in research at a variety of media companies and ad agencies, including Turner, Zenith Optimedia, Doubleclick and J. Walter Thompson.

A few years ago, veteran branding experts and golf fanatics John von Stade and Merrill Squires took stock of the golf industry and had a light-bulb moment: Why not build a business around the world of PGA Tour caddies, who are as much a part of the game as the pros themselves.

The idea turned into a business plan and this past summer, the two executives launched The Caddie Network, a digital content platform showcasing the caddie life through features, videos, photos, surveys and other content.

The goal of the venture is to give an inside view of the caddie’s experience on the tour while also giving professional caddies a platform to make money though a licensing agreement with the network.

Merrill Squires (left) and John von Stade have targeted PGA Tour caddies as the foundation behind The Caddie Network.
Photo: the caddie network

Von Stade, who spent 25 years in the golf business while working for such agencies as Millsport and Velocity, was convinced of the growing business opportunity related to the world of caddies.

“We looked at the market to see if there were legitimate gaps in certain sports verticals,” he said. “I’ve worked on both the buy and sell side and worked with every media company in the golf business and noticed a gap in certain coverage areas. One was caddies.”

Von Stade and Squires, also a veteran agency executive, are founders of Accelerated Growth Partners, a privately held branding agency, and they initially raised about $500,000 to launch The Caddie Network. Another primary investor is Paul Speaker, co-owner of the World Surf League and former NFL executive. The company is looking to raise $2 million in venture capital over the next year.

Key to the network was the buy-in from the caddies. To get them to participate in the venture, The Caddie Network signed a 10-year licensing agreement with the Association of Professional Tour Caddies, which represents more than 100 PGA Tour caddies. The group is also a partner in the startup.

“We sat down with the caddies and asked if they would be interested,” von Stade said. “Without the caddies, it goes nowhere and the critical piece was to get the caddies engaged.”

The Caddie Network


LAUNCHED:
June 2018

HEADQUARTERS: Stamford, Conn.

NO. OF EMPLOYEES: 11 (full time and contractors)

WHAT THEY DO: The Caddie Network is a startup digital content platform focused solely on professional caddies through video, features and written content.


Key executives

Merrill Squires
co-founder

John von Stade
co-founder

Scott Sajtinac
president, Association of Professional Tour Caddies

Jeff Bookout
partner, ITR Management

The deal calls for the caddies to earn an undisclosed percentage of revenue in return for rights to content.

The initial revenue model calls for the sponsorship of branded content on the site to be followed by ad sales. The network is in talks with brands in the insurance, financial services, footwear, watches and credit card categories. The site is now free, but a subscription model is possible in the future.

Currently, 148 out of the 165 professional caddies are part of the licensing agreement. Nearly all caddies have received permission from their bosses — the PGA Tour pros — to participate.

“If you look at the evolution of caddying throughout the years, it is much more of a respected profession, and The Caddie Network is an example of that,” said Kenny Harms, a board member of the Association of Professional Tour Caddies who has been involved in the development of the network.

Harms, who caddies for PGA Tour pro Kevin Na, said the business model will help caddies land sponsorships of their own from companies that want to be associated with PGA Tour pros.

“Everything is based on content, especially for advertisers, and this is going to promote the caddies,” he said. “We are on the ground floor and now with The Caddie Network, it is the missing link as we look to move forward in the business world.”

The content comes from caddies and other contributors, and can range from an article on a golf rule to a whimsical piece with caddies making predictions on college football games. Among other content highlights:

 A “Coffee with Caddies” video series and dispatches from the recent Ryder Cup held in Paris with caddies Tim Mickelson and Paul Tesori.

 A TV show in the works with Jim “Bones” Mackay, former caddie for Phil Mickelson. The show is contingent upon getting it sold.

 A media and marketing partnership with the makers of the documentary “Loopers: The Caddie’s Long Walk.” The network plans content tied to the documentary, such as highlights from events caddies will host at film festivals.

What won’t be featured is any negative player content, given that the caddies’ jobs are directly tied to the players.

“We won’t come out with salacious news about a player on the tour,” von Stade said. “We are not going to be the TMZ of golf. That’s a quick way to lose jobs.”

The site is averaging around 80,000 unique visits per month with page views and audience traffic up 47 percent on a month-to month basis. The viewer demographics to date show that 68 percent of visitors range between the age of 25 and 54.

Now that it’s rolled out, the focus for the company is to increase marketing efforts to raise the network’s profile.

“We’ve got to build the brand,” von Stade said. “We’ve spent little money on the brand side and now we have to put together a good strategy to be part of the vernacular when you think about golf.”

Future plans also call for the site to add content from caddies on the European and LPGA tours.

“We’d like to bring in everyone,” von Stade said. “We have lofty goals.”